School board adopts 3% utility tax


The Rye City Board of Education has voted to approve a 3 percent utility sales tax on residents, lightening the district’s financial load in an environment strained by the state’s 2 percent tax levy cap.

Using data provided by the City of Rye, which currently collects an annual $400,000 on its 1 percent utility tax, Assistant Superintendent for Business Gabby O’Connor estimated after the district imposes a 3 percent utility tax this September as planned, it will collect roughly $1.2 million annually.

Pro-rated, the district will collect about up to $900,000 over the following 10 months, O’Connor said.

Unlike the City though, it is possible the district would not have the opportunity to collect on residents’ water bills, O’Connor said.

A number of economic arguments were trotted out for and against the tax at the sparsely attended hearing, which drew only six attendees, four of whom were former school board members.

Bob Zahm, who served on the school board from 2004 to 2010, said such a possibility means the figure of $900,000 is significantly overblown.

UtilitytaxChartAccording to the city’s 2013 utility tax receipts, which were obtained by the Review, the city’s second-highest collection after Con Edison, which comprised 76.7 percent of the city’s total utility tax revenues, came from United Water, which comprised 13.3 percent. The next highest source of utility tax revenue, Verizon, came to only 1.9 percent of total revenues.

After the school board’s May 28 public hearing on the utility tax, the district filed with the four government entities with which it was required to file.

More information will become available to the district, such as whether it will be able to tax water services in the coming weeks, according to district spokesperson Karina Stabile.

“There’s a lack of information out there [on how the utility tax would work for Rye] because the district is one of the last entities that can impose this tax but hasn’t actually done so,” Stabile said.

Now that the tax has been adopted, it would likely be applicable to utility company bills on gas, electricity, refrigeration and steam services as well as land line and cell phone services, except for pre-paid plans.

One of the biggest differences between utility tax and property tax revenue streams is non-residential property owners, like businesses and churches, instead of just property owners within the school district, are being asked to fund the district’s budget.

During the hearing, former school board president Steve Feeney, who served 15 years on the board, called not adopting a utility tax “my biggest failure as board president.”

There are multiple benefits to the tax, Feeney said, including the fact that bond rating agencies like Moody’s look on it favorably as a means of revenue diversification falling outside of the traditional property tax revenue.

“You have something available for you to use that will make a positive difference now and in perpetuity,” Feeney told the board.

Zahm, who called the tax inefficient and non-transparent, also argued the tax is regressive, meaning it will likely disproportionately affect poor families since the rate of taxation will not vary based on income.

Pointing to the hearing’s low turnout, Zahm also criticized what he saw as a lack of community conversation during discussions about the utility tax that might have given people a sense of how its adoption would economically affect the average homeowner.

“It’s not transparent. It’s not even translucent,” he said.

Most people, Zahm said, would not be aware of the new tax, since they would only see a higher number in their phone or electric bill’s tax column, since it is not broken down into the different types of utility tax.

“Just because the budget passed does not mean the community approved the utility tax,” he said.

At a special meeting convened following the end of the public hearing, the board adopted the 3 percent tax by a six-to-one vote, with outgoing board member Ed Fox opposing the tax.

Fox suggested an amendment to the resolution that would provide for a sunset clause to take effect on Dec. 31, 2015, but the amendment to add a sunset was defeated six votes to Fox’s one.

Board president Laura Slack said there is no timeline on the tax but it can be repealed at any time.

Slack said the board first considered the tax as a way to help make up for a projected $3.6 million budget shortfall in the 2014-2015 school year’s budget.

CONTACT: liz@hometwn.com